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This valuation method assumes that the stock valuation will revert to its historical mean in terms of Price/Sales Ratio. The reason we use P/S Ratio instead of P/E Ratio or P/B Ratio is because Price/Sales Ratio is independent of profit margin, and can be applied to a broader range of situations.
Median P/S Value is calculated as trailing twelve months (TTM) revenue per share times 10-Year median P/S ratio. Wal-Mart Stores Inc's revenue per share for the trailing twelve months (TTM) ended in Oct. 2014 was $149.05. Wal-Mart Stores Inc's 10-Year median P/S ratio is 0.53. Therefore, the Median P/S Value for today is $79.00.
As of today, Wal-Mart Stores Inc's share price is $88.51. Wal-Mart Stores Inc's median P/S value is $79.00. Therefore, Wal-Mart Stores Inc's Price to Median P/S Value Ratio for today is 1.12.
During the past 13 years, the highest Price to Median P/S Value Ratio of Wal-Mart Stores Inc was 3.07. The lowest was 0.82. And the median was 1.14.
Wal-Mart Stores Inc's Median P/S Value for today is calculated as
|Median P/S Value||=||Total Annual Sales / Shares Outstanding||*||10-Year Median P/S Ratio|
|=||Revenue per Share (TTM)||*||10-Year Median P/S Ratio|
10-Year Median P/S Ratio is 0.53.
Wal-Mart Stores Inc's revenue per share for the trailing twelve months (TTM) ended in Oct. 2014 was 39.87 (Jan. 2014 ) + 35.39 (Apr. 2014 ) + 37.06 (Jul. 2014 ) + 36.73 (Oct. 2014 ) = $149.05.
It also assumes that over time the profit margin is constant. If a company increases its profit margin to a sustainable level, this value might under-estimate its value. If it has permanent declined profit margins, this may over-estimate the companys value.
Wal-Mart Stores Inc's Price to Median P/S Value Ratio for today is calculated as
|Price to Median P/S Value||=||Share Price||/||Median P/S Value|
Wal-Mart Stores Inc Annual Data
Wal-Mart Stores Inc Quarterly Data